Demand for Nvidia chips, used to power AI models from various companies, had propelled the company to one of the largest capitalizations in the world.
Tech giant Nvidia saw stock prices crash on Monday following investor concerns that low-cost Chinese artificial intelligence (AI) models could negatively affect sales of the company’s chips.
Nvidia shares fell from Friday’s closing price of $142.62 to $118.51 by the end of Monday, a decline of nearly 17 percent. The collapse in share value wiped out $593.7 billion in the company’s market capitalization. The tech-focused NASDAQ index declined by more than 3 percent on Monday. Nvidia’s market crash followed investor concerns about the impact of the open-source AI model DeepSeek developed by a Chinese startup.
The $593 billion market cap wipeout for Nvidia stock on Monday was a record one-day loss for any company on Wall Street. It was more than double the previous loss by Nvidia in September 2024.
Researchers from Hangzhou-based DeepSeek wrote in a paper last month that the DeepSeek-V3 model, launched on Jan. 10, used Nvidia’s lower-capability H800 chips for training at a cost of less than $6 million.
DeepSeek-R1, released last week, is 20 to 50 times cheaper to use than OpenAI’s o1 model, depending on the task.
Investors are worried that the emergence of a low-cost Chinese AI model could threaten the dominance of AI leaders such as Nvidia.
The hype around AI has powered a huge inflow of capital into equities in the past 18 months, inflating valuations and lifting stock markets to new highs.
“If it’s true that DeepSeek is the proverbial ‘better mousetrap,’ that could disrupt the entire AI narrative that has helped drive the markets over the last two years,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.
“It could mean less demand for chips, less need for a massive buildout of power production to fuel the models, and less need for largescale datacenters. However, it could also mean that AI becomes more accessible and help kickstart the development of a wide array of useful applications.”
